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A Rethinking of Digitalization and Knowledge Management

Yasuki Okai, Executive Fellow

Nov. 05, 2018

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What do you imagine when you hear the words “knowledge management”? Many may recall the bitter experience of failed attempts to introduce groupware and DWH (data warehouses) for internal information-sharing 20 years ago. There are fewer opportunities to even hear the phrase “knowledge management”, and at least for the management, it’s less exciting than “digitalization” which is occupying a lot of people’s minds right now. However, there is greater meaning in rethinking knowledge management precisely because digitalization is now accelerating more than ever.

Knowledge management as a means of increasing your ability to solve challenges with customers and society

To explain the reasons for this, we must first ask what knowledge is in the first place. There are many theories for a definition of knowledge; for our purposes, let’s define it as the “ability to solve challenges”. Doing so will also clarify the difference between knowledge and the “information” with which it tends to get confused. For example, in the case of a boutique sales employee, knowing information about the trends and products of that year will not alone resolve any challenges. However, using that knowledge to provide advice tailored to the needs of the customers they see is a good example of clothing sales knowledge. As another example, being able to use information relating to a store’s top-selling merchandise data and popular trends among customers as input to stock the right merchandise means having merchandising knowledge.
This definition of knowledge as being tied to a specific task or objective is also seen in the writings of authorities on knowledge management (e.g., renowned Hitotsubashi University professor Ikujiro Nonoka), and could be characterized as a relatively orthodox way of thinking. If knowledge management refers to management methods for enhancing the organizational knowledge of a company, then as a natural extension of the definition of knowledge, knowledge management means increasing the ability of a company to solve challenges with customers and society. There is little difference even if this is rephrased as increasing a company’s added value, and thus ultimately knowledge management is essentially the same thing as creating added value for a company.

Utilizing digital technology to create added value for your company will lead to differentiation

Even though knowledge management came onto the scene shouldering the important question of how to increase a company’s added value, the boom 20 years ago was unfortunately dominated by talk of building just internal information-sharing infrastructure, and simultaneously the true meaning of knowledge was forgotten. Knowledge management requires renewed focus now that digitalization is heating up, and because the number of managers losing sight of the keys to differentiation is increasing amid accelerating digitalization.

By doing things like developing smartphone applications to improve customer experience (CX) and realizing cost reductions through automation of operational processes, differentiation may be attainable in the short term, but competitors can easily follow suit, and the value of differentiation is quickly lost. With regard to this, there are many hidden clues for differentiation if you take a step back from efforts that are purely for the sake of digitalization itself and think about what added value means for your company, or in other words, what your organizational knowledge is and how can you strengthen it with digital technology.

For example, focusing on knowledge leads to the idea of re-acknowledging and differentiating the value of the human element. This is because humans are essentially the central bearers of knowledge. If you define knowledge as the ability to solve challenges, then you also need (i) the ability to steer solutions tailored to your challenges from diverse information; (ii) the ability to identify challenges in the first place; and (iii) the ability to convincingly convey solutions to others. With respect to (ii) and (iii) in particular, even with advances in AI technology, not much can be expected from machines yet.
Acknowledging that humans are the central bearers of knowledge does not mean quitting digitalization. Rather, the idea is that companies can think up an array of creative solutions to address how to utilize digital technology to produce organizational knowledge in a short period of time, how to convey knowledge to the growing multitude of customers in digital spaces, how to design services that synthesize human and machine elements, and other questions about how to use digital technology to leverage human value.

I’m of the view that instead of blindly fumbling into digitalization, we can facilitate the transition from the perspective of knowledge management, meaning, being aware of a company’s knowledge management and using digital technology to strengthen it. I think that may be the key to creating added value while fostering diversity against the all-commodifying tide of digitalization.

NRI Research Paper Knowledge Creation and Integration September, 2018

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Nomura Research Institute, Ltd.
Corporate Communications Department